Once Japan was proud of its job security. Many Japanese have viewed huge layoffs as an "American thing." But the collapse this week of Yamaichi Securities, the country's fourth-biggest brokerage firm, sends a new message: Layoffs are becoming a Japanese thing, too.
The closing of the 100-year-old company, once one of Japan's most prestigious firms, is the country's biggest corporate failure since World War II.
The announcement Nov. 24 shocked the nation, where unemployment is nearly unheard-of. The collapse will leave Yamaichi with about $27 billion in liabilities and force the lay off 7,500 workers.
Yamaichi's president, Shohei Nozawa, who took the post a few months ago after a dozen top managers had to resign over a corporate payoff scandal, took responsibility for the collapse
"Management was to be blamed. The employees weren't," he said in tears.
The collapse at Yamaichi is not an isolated incident. Earlier in November, Sanyo Securities, one of Japan's 10 biggest brokerages, filed for bankruptcy, and Hokkaido Takushoku Bank moved to close its doors. The failures of these three companies will force layoffs of more than 16,000 workers around the country.
The number of layoffs so far is "only a handful," says Kazuhiko Ogata, an economist at Jardine Fleming Securities. "I'm concerned the collapse of companies like Yamaichi could stir the financial system."
Mr. Ogata suspects that an inevitable reduction of public projects will force about 1 million layoffs in next three years in Japan's construction industry alone. Construction currently employs about 7 million workers, more than 10 percent of Japan's labor force, while the financial industry accounts for 2.5 million.
The upheaval comes as Japan is gearing up for a major liberalization of its financial sector next spring. The process, known as "the Big Bang," will expose Japanese banks, securities firms, and insurance companies to increasing international competition.
Although most Western analysts praise Japan's leaders for committing the country to the strong discipline of the Big Bang, many fault their sense of timing.
"The Japanese government waited until the worst possible time to deregulate its economy," says Andrew Shipley, an economist at Schroders Securities Japan Ltd. "Because now Japan's economy is slowing, displaced workers have a difficult time to find a new job."
An increasing number of Japanese companies, including contractors and some of Japan's biggest banks, have already announced that they are planning to shed employees. Mr. Shipley predicts Japan's unemployment will surpass United States unemployment in the near future. Japan's jobless rate is already near its all-time high of 3.5 percent. US unemployment in October was 4.7 percent.
"This is the starting point of the transformation of the Japanese economy, from one governed by bureaucrats, which is opaque, to one [governed] by market forces," says Toru Nakakita, director of Toyo University's economic institute in Tokyo. "This is the inevitable process to dismantle the old system to give [Japan] a world-class financial system. That will raise productivity in the whole economy."